October, already a spooky month, held true for two key monthly performance metrics in the reverse mortgage space.
Home Equity Conversion Mortgage (HECM) volume saw a slight uptick of 2% to 2,667 loans issued in October, a continuing symptom of reduced case number assignments, according to data compiled by Reverse Market Insight (RMI).
HECM-backed Securities (HMBS) issuance dropped considerably, from $638 million in September to $565 million in October, with only 87 pools issued, according to public Ginnie Mae data and private sources compiled by New View Advisors.
HECM volume nearly flat in October
With the first anniversary of the bankruptcy of Reverse Mortgage Funding (RMF) fast approaching, the former lender has only just now managed to fall out of the top 10 rankings for 2023 as of Oct. 31.
Several months of low case number issuance contributed to the generally flat volume for October. However, without concrete data for September case numbers, the potential performance of the industry for the next few months is more clouded than normal, according to an RMI commentary accompanying the endorsement data.
Only four of the top 10 lenders in the industry managed to post volume gains. The biggest performance increase relative to September came from Traditional Mortgage Acceptance Corp. (TMAC) doing business as Goodlife Home Loans, which jumped 45.2% to 135 loans.
Open Mortgage posted a gain of just under 30% to 57 loans, while Liberty Reverse Mortgage jumped 20.6% to 117 loans.
RMI President John Lunde said that a lack of case number data and the general slowness of the holiday period make it difficult to predict reverse mortgage performance for the rest of 2023.
“November and December are usually a bit slower from a case number perspective as the holiday effect takes hold, but it’s hard to tell from an endorsement perspective with only August to look at,” Lunde told RMD.
He added: “We’d usually look to the data trends for September/October case numbers issued [to get an] an idea what to expect there, so in the absence of that we’d just be guessing from anecdotes and macro factors like interest rates.”
The release of case number data is always “a bit more variable,” Lunde said.
New-to-reverse customers are the industry’s focus, however, which makes for a welcome development.
“I do think that’s where the focus is in the industry since both purchase and refi markets are incredibly challenging,” he said. “We’d love to see growth in that segment, and the presence of several new institutions at the recent conference would be a great boon in that regard.”
HMBS issuance drops
High interest rates continue to depress HMBS issuance, according to New View Advisors.
Once again, the RMF portfolio seized by Ginnie Mae in December 2023 issued no pools this month, though its HMBS portfolio continues to make up roughly one-third of all HMBS issuance.
Finance of America Reverse (FAR) was the largest issuer for October, with $216 million up from $197 million recorded in September.
The only other HMBS issuer to top $100 million was Longbridge Financial.
October produced $374 million of original, first-participation HMBS production, down from September’s $445 million, New View said in an accompanying commentary.
“The decrease in first participation issuance was partly due to Guild Mortgage Company issuing one $7.5 million pool in October, compared to their four months of production totaling $67 million issued in September.”
September’s first-participation issuance included an additional $7.7 million pool of season loans, though no seasoned pools made it into October issuance activity, New View said. However, a new Ginnie Mae policy rolled out this year ius beginning to affect the marketplace.
“Notable in the October HMBS issuance data are 23 pools with aggregate pool size less than $1 million. Issuers are taking advantage of Ginnie Mae’s provision to issue pools as small as $250,000,” New View explained. “This represents $13.4 million of [unpaid principal balance] that may not otherwise have been issued in October.”
Ginnie Mae issued an All Points Memorandum in February that reduced the required minimum size from $1,000,000 to $250,000 for all HMBS pool types.
The change was made in an effort “to relieve [interest rate] pressure and decrease the amount of time Issuers must carry balances between the HECM loan origination disbursement and HMBS securitization,” the company said at the time.
“Both of these provisions are designed to provide warehouse financing relief to Issuers,” New View said in its October data commentary.